‘Ear’ Comes Otonomy: Series C Nets $45.9M for Program Trio

By Randy OsborneStaff Writer

Otonomy Inc.’s $45.9 million Series C round should last the firm into the second half of 2014, when one of its ear disease drugs is expected to be ready for a new drug application filing, another will have finished the first of a pair of pivotal trials and a third will be eligible for an investigational new drug application.

“This [financing] gives us plenty of runway,” said Paul Cayer, chief business officer of San Diego-based Otonomy. “Getting those three things done puts us in a very nice position, with options for next steps,” including regional partners for Europe and Japan.

“We’re, of course, looking at where our next financing might come from,” he told BioWorld Today. “Having a very strong syndicate [of investors] allows us to do a follow-on privately, but we also think we’ll be set up nicely, depending on the public markets, to look at that as well.”

OTO-104 is a sustained-release formulation of the steroid dexamethasone, delivered locally by injection, for hearing and balance disorders that has completed a Phase Ib study in Ménière’s disease, an experiment that was “probably closer to a Phase II, from the standpoint that we evaluated a couple of doses,” Cayer said. “It was the largest placebo-controlled study that had been done in that disease area.”

The Phase IIb trial, starting by the end of the year, is designed as the first of two pivotal efforts. “We’re basically managing the trial in every respect as if it’s a pivotal study, from the standpoint of dose, endpoint and review of the data, all of that,” Cayer said. “The endpoints are very clear, the dose selection is very clear. We discussed that approach with the FDA.”

Already in place was “a body of clinical literature showing that steroids provided help with the symptoms of Meniere’s,” and favorable Phase Ib data bolstered the company’s case for moving the compound along quickly, he said. OTO-104 showed “very nice separation from the control group, in terms of the reduction of vertigo, and we even showed improvement in tinnitus [ringing of the ears] in these patients,” Cayer said.

“There are, we think, close to a million patients in the U.S. who have Meniere’s disease, of which tinnitus is just one of the symptoms,” he said. Others include debilitating vertigo and hearing loss so extreme that patients are unable to drive cars. “They just have to lie in bed in a quiet room until it passes,” Cayer said. OTO-104 also will be developed separately for acute hearing loss.

Otonomy’s other compound, OTO-201, is a sustained-release form of ciprofloxacin for middle ear conditions, and that drug proved encouraging in a Phase Ib trial that enrolled pediatric patients undergoing tympanostomy tube placement surgery. “That, too, was more like a Phase II [trial], with over 80 patients,” Cayer said. “We’re moving straight from that study into a Phase III program this year as well.”

Yet to enter the clinic is a therapy that focuses specifically on tinnitus, “a horrible problem, the number one disability of returning vets from Iraq and Afghanistan.” No approved therapies exist for tinnitus, Meniere’s disease or tympanostomy tube patients, leaving all three markets wide open.

“We look at it as one of the last frontiers of drug therapeutics,” Cayer said, comparing the delivery method to the shots by which various age-related macular degeneration (AMD) treatments are given. “It’s the perfect metaphor,” he said. “Clearly the treatment of AMD and other back-of-the-eye disorders took off with the introduction of local injections, and now you’ve got this huge market that’s been created. The [ear disorder] field can develop in much the same way that intravitreal injections developed. Our technology platform provides prolonged drug exposure wherever we need it – in the middle of the ear, which is the target of OTO-201, or the inner ear, which is the target for our steroid for Meniere’s.”

Cayer said Otonomy likely will commercialize therapies in the U.S. on its own. “The dynamic in the U.S. – a large number of patients, seen by a small number of specialists – [creates] a perfect situation for a small company like us to have a dedicated, targeted sales force,” he said, though Europe and Asia represent larger challenges.

“We’ve been talking to [potential partners for selling overseas] since the company was founded,” Cayer said. “We’ll accelerate that now.” Ear diseases have been off the radar for most pharmaceutical firms, he noted, and “we’ve had to educate them” about patient populations and market opportunities. “We would look to get partners in Europe and Asia identified, at least for our two lead programs, within the near to midterm,” Cayer said.

The company’s Series A financing of $10 million in June 2010 was followed by a Series B that raised $38.5 million in August of that year. OrbiMed Advisors LLC led the latest round, joined by new investors Aperture Venture Partners and Osage University Partners. Existing investors Avalon Ventures, Domain Associates, Novo Ventures, RiverVest Venture Partners and TPG Biotech also took part. In conjunction with the financing, Chau Khuong, a private equity partner at OrbiMed, joined Otonomy’s board. (See BioWorld Today, Aug. 30, 2010.)

In other financings news:

• Cubist Pharmaceuticals Inc., of Lexington, Mass., said it plans to start an offering of $600 million in convertible senior unsecured notes that are expected to be issued in two $300 million series, with one series maturing on Sept. 1 , 2018, and the other maturing on Sept. 1, 2020. The company also expects to grant the initial purchasers of the notes an option to purchase up to an additional $50 million aggregate principal amount of each series. Final terms of each series will be determined at the time of pricing.

• Mind-NRG, of Geneva, said it closed a €6 million (US$7.92 million) Series B financing. The company, created in 2010, is investigating the use of neuregulins for the treatment of various neurological and psychiatric disorders. The new funding will be used to elucidate the neuroprotective effect in Parkinson’s disease of its compound NRG-101, with the aim of demonstrating proof of concept in patients. To date, NRG-101 has been shown to target multiple mechanisms of neurodegenerative diseases, distinguishing it from other neuroprotective compounds that inhibit single disease-related targets or pathways.

• Opexa Therapeutics Inc., of The Woodlands, Texas, reported closing of the partial exercise of the overallotment option granted to the underwriters to purchase an additional 650,000 shares of its common stock at a price to the public of $1.50 per share. The option was granted in connection with the company’s underwritten public offering. The total gross proceeds from the offering amounted to $18.98 million. (See BioWorld Today, Aug. 14, 2013.)

• PDL Biopharma Inc., of Incline Village, Nev., said it adjusted the conversion rate for its senior notes. The one due May 1, 2015, is now 157.3700 shares of common stock per $1 ,000 principal amount or approximately $6.35 per share; and the note due Feb. 15, 2015, is 179.777 shares of common stock per $1,000 principal amount or approximately $5.56 per share. The conversion rates for the notes are adjusted in connection with the company’s regular quarterly dividend of 15 cents to be paid on Sept. 12.

• Triton Algae Innovations Ltd., of San Diego, said it completed a $5 million Series A financing to support R&D, expansion of its Phycologix platform and commercialization of Phycoshield, a mammary associated amyloid (MAA), a mammalian colostrum protein with the potential for addressing intestinal diseases in pets, livestock and humans. The company has developed a synthetic biology platform for the production of high-value proteins in algae.